A Proposed Project Has Fixed Costs of $3,700, Depreciation Expense

question 177

Multiple Choice

A proposed project has fixed costs of $3,700, depreciation expense of $1,400, and a sales quantity of 1,500 units. What is the contribution margin if the projected level of sales is the accounting break-even point?

• A) $2.47
• B) $2.64
• C) $3.10
• D) $3.40
• E) $3.71

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Definitions:

Fabrication Activity Cost Pool

A grouping of all the costs associated with the fabrication activities in a manufacturing process, used in activity-based costing.

Idle Capacity

Idle capacity refers to the unused portion of the total capacity of a manufacturing unit which could otherwise be used to produce goods and generate revenue.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, improving the accuracy of product costing.

Activity-Based Costing System

A costing methodology that assigns costs to products or services based on the activities they require and the resources consumed by these activities.